Finally a statement has come from the Louisiana state property insurer of last resort, Louisiana Citizens, which confirms that their losses from hurricane Isaac insurance claims will not be sufficient to trigger the Pelican Re Ltd. (Series 2012-1) catastrophe bond. There have been a number of statements where LA Citizens have said they expect the cat bond to be safe, but now they have released some claims information which fully confirms that fact.
LA Citizens says it has already settled 85% of the claims it received in the wake of hurricane Isaac. Of 17,059 registered claims, 97% have been inspected and the 85% have already received their settlement payouts. It’s the fastest Citizens has ever been able to respond to claims after a significant loss event, they said.

Loss payments added up to $57.8m in the second week fo October and LA Citizens don’t expect the loss to climb much higher than $75m after all claims are paid and any adjustment expenses are accounted for. The absolute maximum they said it could reach is $100m.

As Pelican Re doesn’t trigger until LA Citizens ultimate net loss reaches $200m, the catastrophe bond and its investors are safe. The majority of the claims and expenses will be dealt with from LA Citizens cash reserves of $75m, with anything above that level triggering a reinsurance policy.

Interestingly, we understand that this $125m reinsurance policy, which covers losses from $75m up to the $200m Pelican Re cat bond trigger, may involve some collateralized reinsurance players which means a very small loss could seep into the collateralized reinsurance or ILS fund market (depending on who participated).

So the Pelican Re cat bond survives Isaac and, given where we are in the current hurricane season and the lack of threatening storms on the horizon, it will most likely still be available to LA Citizens as a source of reinsurance cover for the 2013 hurricane season.